Nuffield Health unveils 6 per cent mini bond

Nuffield Health has launched a five-year bond paying 6 per cent, just weeks after The Jockey Club unveiled a similar bond for income-hungry investors.

Nuffield Health, a charity that manages hospitals and gyms, is aiming to raise £15 million to support investment in healthcare services in the UK. The minimum investment in the bond is £1,000, while the maximum is £250,000.

The bond is not being issued on a market and is not tradable. It is suitable for self-invested personal pensions, but not Isas. The 6 per cent interest will have basic-rate tax deducted, so bondholders will receive 4.8 per cent each year. Any bondholders who are not normally subject to income tax may be able to reclaim the tax from HM Revenue & Customs.

The Nuffield Health bond follows a similar issue by The Jockey Club last month.

Like the Nuffield bond, The Jockey Club bond has a five-year term and is not tradable on a market.

It pays 4.75 per cent gross interest in cash (3.8 per cent net) and an additional optional 3 per cent gross interest, payable in racing rewards such as tickets, food and drink at its 15 racecourses. The minimum investment in the bond is £2,000 and the maximum is £100,000.

Neither bond is protected from loss by the Financial Services Compensation Scheme. If Nuffield Health or The Jockey Club go into administration during the term of the bond investors could lose part or all of their money.

Capita, the firm that is managing both issues, calls the bonds ‘mini bonds’ to distinguish them from retail bonds that are traded on the London Stock Exchange.

It expects the market for mini bonds to grow from less than £90 million last year to £1 billion by the end of 2013. Capita already has a pipeline of hundreds of millions of pounds from big consumer brands expected to enter this market.

Companies that have previously launched mini bonds include John Lewis and King of Shaves. Vouchers, loyalty points and free products are often offered as added incentives to customers when they sign up to a bond.

Justin Cooper, chief executive of Capita Registrars, comments: ‘Mini bonds are going mainstream. Brands are able to raise capital at a time when lending from banks continues to prove challenging and connect with their client base or “following” and involve them in the development of their business.

‘With consumers seeing better return on investment potential than they would through a bank account, as well as extra benefits, we are expecting to see large growth in the market in the coming years. By 2017, we expect the market to reach £8 billion.’

The Jockey Club bond closes to applications on 28 May while Nuffield Health's bond is due to close on 18 June.

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Comments

You raise an interesting point Dr Jocky Borne. By the way on Nuffield Health's website it says this:

'We are the UK's leading health charity. We are independent of government and have no shareholders, so we are free to reinvest any profit we make for the benefit of our customers. This puts us in a unique position to constantly challenge the status quo, anticipate your needs, and constantly seek better ways of doing things.'

Charitable status has a number of technicalities and this statement nods at a couple. It does show they need to remain compliant with having no shareholders. Ok so they do not have 'shareholders', but this charitable commission condition is based on an ethical principal that shareholders having a vested interest might seek to influence the running of the charity. And therefore the charity might not remain 'independent'. The same could be said for bond holders, but technically the law does not mention the word 'Bondholder' so perhaps Nuffield have found a loop hole? But ethically - are they flaunting the principles behind the condition?

Another technicality of charitable status is that of reinvesting all profits back into the charity. Again, I feel Nuffield could be skirting the edges of legality on the basis that bond interest payments come from operating turnover, pre profit, rather than net profits themselves. Either way, in reality, whatever is paid to bondholders this in effect is reducing the £ which can be spent to provide charitable benefit to those deserving souls who received their help (whoever these are!!?)

You know. Nuffield are not the first, and are sure not to be the last charity to deploy Bond issues. I actually think my main argument is with the organisation themselves. As a charity who pay negligible tax - I believe in the region of 20M breaks annually, they provide as I am led to believe no real ring-fenced charity to deserving folks or social systems etc. They are a private organisation charging premium rates, and can only credit their charitable status with weak claim to provide a relatively small number of NHS treatments each year. Compare this even with the likes of BUPA whom whilst not a charity and whom do pay enormous tax sums, do ring-fence in the region of 20M themselves for genuine charitable purposes.

I know who I would prefer to bring my private healthcare business to on this basis!

I recognise this is a somewhat fuzzy area, but I'm struggling to see how Nuffield can remain entirely independent from influence by providing this scheme

I was under the impression that a charity should exist without any influence from external stakeholders, no matter where and through what relationship these stakeholders exist.

Bond holders will be looking for a return which is in some sense dependent upon the financial success of Nuffield Health. Perhaps not in the same sense as the variable returns from shareholder dividends. But never the less, bond holders could be inclined to take a keen interest in the activities of Nuffield Health and could exert influence if they perceive their ideas to be in the organisations best commercial interest. And that should certainly not be permitted.

I'm not sure what if anything Nuffield Health do in the charitable arena (I've searched but can not find any evidence of their providing real 'charity' to anyone?), but I would hate to think that this might damage any future investment they provide for charitable benefit.